Resources bid revival off and racing

Takeover activity in Australia’s resources sector has roared back into life. After a relatively quiet start to the year, five deals worth a combined $20 billion have given impetus to corporate deal makers across the mining and energy industries.

The spending spree started last Monday when US miner Peabody Energy and ­global steel maker ArcelorMittal combined forces for a joint $4.7 billion cash takeover bid for
Macarthur Coal
just a day after the federal government provided more investment certainty by releasing details of its carbon pricing plan.

Macarthur remains one of the most hotly contested coal targets in the coal industry with Xstrata, Peabody and
New Hope Corp
all previously sniffing around the coking coal producer.

That same day China’s Sichuan Hanlong Group launched a $143 million initial bid for uranium explorer
Bannerman Resources
, which is struggling to finance a large project in Namibia.

Hanlong, a privately owned Chinese investment company with interests in property, tourism and mining has been eager to up its exposure to what it sees as an undervalued commodity with talks first held with Bannerman last August.

Last week, Hanlong hinted it was looking at other opportunities. The first cab off the rank was obviously iron ore junior
Sundance Resources
given Hanlong’s 18.6 per cent stake in the company, which is looking to develop the $US4.7 billion Mbalam iron ore project in Cameroon and the Republic of Congo.

Monday’s $1.44 billion cash takeover proposal for Sundance came more quickly than many expected and marked Hanlong’s second takeover offer for an ASX-listed company in just a week. JPMorgan made the point that with
BHP Billiton
, Rio Tinto, Vale and Xstrata locking up most of the major West African iron ore projects, Sundance was an obvious target for Hanlong and might expect a counter-bid from a rival suitor according to the broker.

The fourth deal, and by far the largest, was BHP’s $US15.1 billion ($14 billion) agreed takeover bid for shale gas player Petrohawk Energy last Friday with plans to spend more than $US50 billion to help boost production from the assets over the next decade.

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It follows BHP’s $US4.75 billion buyout in February of Chesapeake Energy’s shale gas assets in Arkansas and signals the world’s largest miner may be on the hunt for more gas assets given its newfound commitment to the sector.

The final deal, at least for now, was a long awaited one with Australian energy major
Santos
making a stock based bid for NSW coal seam gas play
Eastern Star Gas
valuing the target at $924 million.

Santos already held a 21 per cent stake in Eastern Star Gas and has long been tipped to take full control of the energy junior in order to shore up reserves for its proposed $14 billion Gladstone liquefied natural gas project (GLNG) in Queensland.

RBC analyst Andrew Williams describes it as a “very cheap deal" for Santos and good value on many metrics with the 50¢ a gigajoule price for Eastern Star’s 3G reserves at least 10 per cent cheaper than similar large sector transactions.

On a call with media on Monday afternoon, Santos managing director
David Knox
pointed out the deal compared favourably with Royal Dutch Shell’s takeover of Arrow Energy last year which was priced at 66¢ a gigajoule.